Bank Loan Availability and Trade Credit Demand

Posted: 10 Nov 2004

See all articles by Morris G. Danielson

Morris G. Danielson

Saint Joseph's University - Department of Finance

Jonathan A. Scott

Temple University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Abstract

This paper investigates the effects of bank loan availability on the trade credit and credit card demand of small firms, using firm-level data from the 1995 Credit, Banks, and Small Business Survey, conducted by the National Federation of Independent Business. We find that firms increase their demand for trade credit and credit card debt when facing credit constraints imposed by banks. These results provide evidence of a pecking order of debt financing, where firms increase their reliance on potentially expensive sources of funds when bank loans are not available.

Keywords: Small business, trade credit, credit availability

JEL Classification: G30

Suggested Citation

Danielson, Morris G. and Scott, Jonathan A., Bank Loan Availability and Trade Credit Demand. Available at SSRN: https://ssrn.com/abstract=609947

Morris G. Danielson (Contact Author)

Saint Joseph's University - Department of Finance ( email )

Philadelphia, PA 19131
United States

Jonathan A. Scott

Temple University - Department of Finance ( email )

Fox School of Business and Management
368 Speakman Hall
Philadelphia, PA 19122
United States
(215) 204-7605 (Phone)
(215) 204-1697 (Fax)

HOME PAGE: http://www.sbm.temple.edu/%7Escottjon/

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